Exclusive: Health Industry Paid Acting CMS Chief Millions When He Joined Gov’t

rpollock Reporter
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When Andy Slavitt reported for work as deputy administrator of the federal Centers for Medicare and Medicaid Services last June 10, he pocketed at least $4.8 million in tax-free income from major health-care companies.

That’s according to financial disclosure forms obtained by The Daily Caller, now published for the first time.

On June 27, he sold additional stock he personally held, raising his total windfall from the health industry to $7.2 million.

United Health Group was Slavitt’s most recent private sector employer.

The financial disclosure documents permit the public to examine for the first time Slavitt’s financial relationship with United Health Group, which is the largest health insurance company in the nation.

CMS officials have refused to be quoted on the record for this report, choosing to only speak on background.

The agency initially issued a categorical denial to TheDC that Slavitt had sought and received a special “certificate of divestiture,” a loophole which allowed him to indefinitely defer capital gains taxes on the sale of millions of dollars in equities.

But when TheDC produced two certificates of divestiture issued to Andrew and Lana Slavitt — both dated July 9 and signed by the Office of Government Ethics’ general counsel David J. Apol — the agency backtracked.

The special certificates permitted Slavitt to sell 23,711 shares of United Health Group stock and avoid capital gains taxes on the transaction.

On July 9, United Health Group’s stock price was $82.72 — Slavitt pocketed $1.9 million in tax-free income.

That same day, OGE permitted him to sell 11,670 additional shares in the Swiss private equity firm of Partners Group Private Equity, which, according to an Office of Government Ethics official, included underlying health-care investments.

The Swiss per share market price for the stock on July 9 was $249. Slavitt was able to cash in the stock for $2.9 million in tax-free income.

OGE officials defend the practice, saying that the certificates allow incoming government officials to hold equities not tied to their former industry.

But as he entered the sprawling CMS complex that sits on 57 rolling acres in Baltimore County just outside the nation’s capital on July 10, Andy Slavitt was $4.8 million richer than the day before.

From the moment Slavitt’s appointment was announced, independent watchdog groups on both the left and right have expressed misgivings about him, saying he presents a range of conflicts of interest.

Trouble for Slavitt further mounted last July when the administration unexpectedly awarded him a rare “ethics waiver.”

The July 11, 2014 waiver by federal ethics officer Edgar M. Swindell allowed Slavitt to immediately rule on official business that could affect United Health Group — rather than force him to stand down during a mandatory one-year time period as required by Obama’s own ethics rules.

Only about 20 waivers have been granted since the beginning of the Obama administration, according to Craig Holman, a government affairs lobbyist for Ralph Nader’s Public Citizen group.

Michael Smallberg, an investigator for the non-partisan Project on Government Oversight, said the ethics waiver disturbed him.

“It seems to me he is permitted to do a wide range of work that raises conflict of interest concerns,” he told TheDC.

Iowa Sen. Chuck Grassley, chairman of the Senate Judiciary Committee, also expressed uneasiness with the ethics waiver.

“The onus is on CMS to avoid any appearance of a conflict of interest,” he told TheDC.

“The broad ethics waiver adds to concerns that CMS is taking this [Slavitt] arrangement too casually,” he said.

Holman believes the administration awarded the waiver because Slavitt would have faced so many conflicts he would be continually recusing himself, and could not do his job.

“Here apparently, the recusals were going to happen so often they just waived the recusal. That’s not the approach I would have personally made,” he told TheDC.

Since his appointment six months ago, Slavitt has been promoted to the top post at CMS and is now the acting administrator after his boss, Marilyn Tavenner, was fired over Obamacare.

According to news reports, he’s likely to be Obama’s next nominee to lead the immense $662 billion health care bureaucracy. The nomination will require Senate approval.

Even before the advent of Obamacare, United Health Group did enormous business with CMS.

In 2013, the Minnetonka, Minnesota-based firm reported to the Securities and Exchange Commission that it had received $30 billion in revenue from CMS through Medicare and Medicaid, which Slavitt now oversees.

And Optum, Slavitt’s company, has created an intensively complicated web of connections with Obamacare that has delivered profits at both the federal and state level.

Optum runs Healthcare.gov, the main federal Obamacare web site, operates five state exchanges and United Health Group offers insurance in a dozen exchanges.

Slavitt’s tax-free windfall seems to have struck an especially raw nerve among government observers.

Virginia Rep. Morgan Griffin, a member of the House subcommittee on health who confronted Slavitt last July about potential conflicts of interest, told TheDC he was very concerned about Slavitt’s earnings.

The windfall, he told TheDC, “certainly smells to high heaven as my mother would say.”

“There’s certainly no question that even if not improper, it creates the appearance of impropriety,” he said.

A number of liberal and conservative groups agreed Slavitt’s profits from his previous employer were worrisome.

“I think there’s reason to be concerned whenever an official receives payment or favorable treatment from a company when he’s transitioning to a government position and he will oversee the company,” noted the Project on Government Oversight’s Smallberg.

“There is good reason to be concerned whenever a government official’s public actions intersect with his private financial interests,” he told TheDC.

“The fact is he is in the position to make decisions that could affect his bottom line and the fortunes of his former employer,” Smallberg charged.

Grace-Marie Turner, president of the free-market Galen Institute agreed. She called Slavitt’s payout “very troubling.”

“What’s troubling to me is that he has gotten such a huge benefit from his work from United and he is now in direct charge of overseeing this industry and regulating it and deciding how it would be treated,” she told TheDC in an interview.

The $4.8 million payout “does highly concern me,” added Holman.

“It provides a very significant windfall for a government official,” the Public Citizen staffer said.

However, some critics say they would like the president to put Slavitt’s name before the Senate.

“Actually, I think it would be a great idea for him [Obama] to appoint him [Slavitt] because then he’s going to have to answer to the United States Senate about many of these questions,” said Turner.

“I would much rather he get the nomination so that he could have to have these confirmation hearings and bring all of this to light,” she said.